Friday, April 13, 2012

What I’d like to see happen

I’ve been wanting to comment on the e-book lawsuit filed by DOJ for a while but I wasn’t entirely sure I knew enough to say anything (though it hasn’t stopped me in the past). My knee jerk reaction was the the DOJ lawsuit was right. What’s the big deal?

But publishers and booksellers argue that any victory for consumers will be short-lived, and that the ultimate effect of the antitrust suit will be to exchange a perceived monopoly for a real one. Amazon, already the dominant force in the industry, will hold all the cards.

The publishers are stuck in the same way that many behemoths are stuck when faced with disruptive change. They sputter and flap around trying to find something that works and when it doesn’t they cry foul. This criticism is also directed at movie companies (e.g. Sony, Disney) and software publishers (e.g. Microsoft) as well. Likewise, this goes back to the defunct economics argument that size and market share equals monopoly.

The retailer has been taking a more aggressive stance toward publishers in recent months. When it failed to get better terms from a large Chicago distributor, the Independent Publishers Group, it removed IPG’s nearly 5,000 e-books from sale.

Curt Matthews, IPG’s chief executive, said publishers who dealt with Amazon “will have to insist on keeping their fair share. It is obviously true that producing good content is the hard part of making a good book, no matter how that content is captured. Why should publishers cede all of their power to this new player in the book business?”

I smell an opportunity here - is distributing e-books really that difficult? Do they really need to go through Amazon just because of its large presence? What I’d like to see is this: I go into a bookstore - Eliot Bay Books comes mind. I’m surrounded by hard copy books. I get some coffee, sit down and leisurely look through some books that I’ve picked up. I take out my laptop and connect to the bookstore’s server and purchase the books from its own server instead of Amazon unless Amazon’s prices are lower (of course). If I buy the hardcopy, I may even get an option to download an electronic version at a lower price.

I must be missing something since it seems that there is very little barrier to entry for a book retailer to also become and an e-book retailer as well. Isn’t Powell’s already doing this? Perhaps what booksellers need is a packaged service - an outfit that comes in and puts in the technology (servers, routers, etc.) and an inventory of e-books preloaded. Perhaps IPG (above) can be part of this service. Perhaps with Powell’s success they can be that service.

The real problem might be this (emphasis mine):

“If there’s an upside, I don’t see it yet,” said J. B. Dickey, the owner of the Seattle Mystery Bookshop. “My fear is that the major publishers won’t be able to stay in business just selling e-books. You can’t bring in enough money to support the infrastructure. If that happens, there goes the marketing, the editorial, the author tours, the expertise of the book industry.”

Basically, the publishers are subsidizing the marketing and advertising for the retailers (or is it the other way around). Whichever it may be, it doesn’t necessarily follow that retailers can’t do that themselves. I used to value ‘picks by our booksellers’ in bookstores more than those reviewed in the NYT. In this case then retailers by promoting books would be doing Amazon a favor. Yet I don’t see this as a huge problem - it is more likely that if publishers fail to promote books, Amazon might decide to come in and pick up the slack. After all they are the gorilla on the block.

Moreover, it isn’t clear to me that publishers are such good book-pickers. The big splash they make is usually landing some deal with some soon-to-be ex-president whose memoirs barely sell. Yes, Christopher Paolini didn’t really become a phenomenon until Eragon picked up by Knopf - but did Knopf really need to be the heavyweight? Did a big publishing house ‘discover’ JK Rowling? What about the success of Lionel Shriver’s We Need to Talk About Kevin? Did any major publisher really play that large a role?

With the advent of the Internet and various social outlets or even old fashioned word-of-mouth I believe that it is possible to sell and market books without these large publishers. Yes, the future will be tough and even uncertain but that is what disruptive change is about. Lower profit margins, new markets, adopting new technologies and methods. As in the behemoths of the past, publishing companies are looking to protect their profit margins to sustain their overly high overheads and its time this old model is discarded.

The future if there is one is perhaps more local picks, cross subsidizing of e-books and hard copy books, more loyalty by customers to their local bookstores (and I think there is such a thing especially here) that look out for their needs and provide good recommendations, and yes, more fragmentation which I think is something to be exploited rather than feared. 

(This has turned out to be a rant.)

My previous thoughts on book retailing here and here.

Update (5/14/2010): How could I have left out Barnes and Noble as another possible competitor to Amazon? Are tie-ins between print and e-books illegal? I'm curious to know why retailers have not attempted to use this strategy.

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